Sponsored Search Auction Mechanisms

Current session has several papers on auction mechanisms for conducting auctions for which ads will be displayed in sponsored search.

Lahaie, analysis of alternative auction designs, including Yahoo and Google's current mechanisms. Offers an overview of the design space.

Mahdian and Saberi, MSR. Online algorithm, meaning that you have to decide which advertiser gets each search without knowing how many more searches there will be. Based on picking a single price to charge all advertisers. May be missing something, but the problem setup doesn't seem to match real advertising allocation problems, and the solution seems to unnecessarily restrict to fixed-price for all advertisers, rather than the kinds of mechanisms in the previous and next papers.

Aggarwal, Google presentation, Aggarwal et al.. Current mechanism: Advertiser makes a per-click dollar bid (for a particular search keyword). Google orders the bids based on bid*estimated-clickthru-percentage. If you're in slot j, you pay the rate based on the bid of slot j+1. This seems like it might be a nice generalization of 2nd price auction mechanism, but it's not-- it's not incentive-compatible. Presented design for a new mechanism in which truthful bidding is best, assuming others are bidding truthfully. For some reason, she said you can't use a VCG mechanism unless a "separability" condition holds. But the actual mechanism she presented is, I think, a VCG mechanism. Perhaps I'm missing something, or perhaps she has a more restricted idea of what a VCG mechanism is. The mechanism she presents is only incentive-compatible if there are no budget constraints that tie different auctions together or repeated-game effects from revealing your preferences today impacts on tomorrow's auction behavior of your opponents.